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MASTER OF SCIENCE IN APPLIED ECONOMICS (MSAE) Sample Question (Econ Major)
Time Duration: 50 Minutes Total Points: 90
Instructions: Answer all the questions in this booklet and in the spaces provided. There are three sections. Section 1 deals with microeconomics, Section 2 with macroeconomics and Section 3 with statistics. Marks are indicated in parentheses. All three sections must be passed separately.
Section 1: Microeconomics
1. The following two equations describe supply and demand in a market respectively.
13 27
2 8 48 0
S D
P Q
Q P
Here, QD represents quantity demanded, QS is the quantity supplied and P represents price.
Find the equilibrium market quantity and price. (Hint: in equilibrium,𝑄𝐷 = 𝑄𝑆) [15 points]
2 2. The income elasticity of demand for product H is negative and equal to – 0.4.
(a) Is H an inferior good or a normal good? [5 points]
(b) If the quantity demanded of H changes from 20 units per week to 16 units per week, calculate the associated percentage change in income. [5 points]
(c) Has income increased or decreased? [5 points]
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Section 2: Macroeconomics
Assume that the consumption function is given by
100 0.60( )
C YT
Planned Investment is 200, Government Purchases are 120 and Taxes equal 50.
(a) What is the equilibrium level of income? [Hint: The total income of a country is referred to as GDP] [15 points]
(b) Given the initial information for (a), what level of government purchases is needed to achieve an income of 1,800? [15 points]
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Section 3: Statistics
For the probability distribution shown in the following table, calculate the weighted mean. [30 points]
X 8 12 16 20 24
P(X) 1/8 1/6 3/8 1/4 1/12
